CAN THE COURTS MAKE USE OF SARS INTERPRETATION NOTES IN INTERPRETING LEGISLATION?

25 Jul 2018

by PKF Durban

In the recent case of Marshall N.O. and Others v Commissioner for the South African Revenue Service CCT208/17 [2018] ZACC 11 (25 April 2018), the Constitutional Court was required to consider the late filing of an application for leave to appeal against a judgement of the Supreme Court of Appeal (“SCA”). In making its determination, the Constitutional Court inter alia, considered the contention by the applicant that the Supreme Court of Appeal should not have relied on a SARSThe South African Revenue Service (SARS) is the official tax authority responsible for the administration and enforcement of tax laws in South Africa. It plays a crucial role in managing the country’s fiscal policy by collecting revenue, administering customs, and ensuring compliance with tax legislation. Established under the South African Revenue Service Act, No. 34 of 1997, SARS functions independently... issued Interpretation Note in reaching its decision.

The applicant contended that the courts must independently determine the meaning of legislation and that the consideration of Interpretation Notes as legally relevant to the proper interpretation of legislation would be unconstitutional as it would inter alia give rise to unequal treatment of litigating parties. In addition, the applicant contended that an Interpretation Note is, in reality, inadmissible opinion evidence.

SARSThe South African Revenue Service (SARS) is the official tax authority responsible for the administration and enforcement of tax laws in South Africa. It plays a crucial role in managing the country’s fiscal policy by collecting revenue, administering customs, and ensuring compliance with tax legislation. Established under the South African Revenue Service Act, No. 34 of 1997, SARS functions independently... submitted that a court may have regard to an administrative body’s interpretation of legislation only to the extent that this interpretation constitutes evidence that it has been interpreted in a consistent manner for a substantial period of time by those responsible for its administration “in order to tip the balance in the case of marginal statutory interpretationStatutory interpretation is the process by which courts and other legal authorities determine the meaning of laws enacted by the legislature. It plays a crucial role in tax law, as the application of tax legislation often hinges on the precise interpretation of statutory language. Ambiguities in legislative texts, either because of complex language or evolving contexts, make statutory interpretation essential...”.

The Constitutional Court considered various aspects relating to the use of “custom” in interpreting legislation and the change over time from legislative supremacy to constitutional democracy and stated as follows:

“Why should a unilateral practice of one part of the executive arm of government play a role in the determination of the reasonable meaning to be given to a statutory provision? It might conceivably be justified where the practice is evidence of an impartial application of a custom recognised by all concerned, but not where the practice is unilaterally established by one of the litigating parties. In those circumstances it is difficult to see what advantage evidence of the unilateral practice will have for the objective and independent interpretation by the courts of the meaning of the legislation, in accordance with constitutionally compliant precepts. It is best avoided”.

On the basis of the above, unless an Interpretation Note evidences a prevailing custom, an Interpretation Note essentially constitutes a one-sided view as to the interpretation of a statutory provision. In such instances, in accordance with the above, any reliance placed by a court on an Interpretation Note may impact on the independence and impartiality of such court in reaching its decision.